Nicaraguan Pres. Enrique Bolaños Geyer, inaugurated in January 2002 after promising a “New Era,” asked the legislature to strip former president Arnoldo Alemán Lacayo’s immunity to prosecute him for having allegedly stolen $100 million from the public treasury and laundered it through domestic and foreign accounts. This followed arrests of officials who had profited from bank collapses costing the government $300 million and of Byron Jerez, head of the country’s revenue department. The prosecutions represented a political showdown between Bolaños and Alemán for control of the Constitutionalist Liberal Party. In September the National Assembly removed Alemán from its presidency; in December they voted 47–45 to remove his immunity, and he was placed under house arrest in anticipation of criminal prosecution.

Per capita income, second lowest in the hemisphere, fell for the second consecutive year, ending the modest recovery (1994–2000) that followed the end of the Contra insurgency against the Sandinista government. The recovery had been fueled by foreign aid, debt forgiveness, and family remittances from Nicaraguans abroad. Adverse weather and collapsed world coffee prices crippled the agricultural sector, spurring protests by coffee growers demanding support. With 11% official unemployment and 36% underemployment, the government was squeezed between popular protests and International Monetary Fund demands for fiscal austerity.

Continuing Nicaragua’s embrace of world markets since the 1990 Sandinista electoral defeat, President Bolaños opened bidding for exploration of newfound oil and natural gas deposits. The legislature approved concessions for a $2.6 billion, 40-year “dry canal” involving high-speed railroads, an oil pipeline, and two deepwater ports. These initiatives were opposed by Atlantic coast indigenous and community groups concerned about environmental impact, land speculation, and violation of regional rights under the 1987 Atlantic Coast Autonomy Bill.

The Sandinista party congress reelected thrice-defeated presidential candidate Daniel Ortega Saavedra as its general secretary, despite party dissidents’ demands for democratization. Ortega’s stepdaughter asked the Supreme Court to overturn a statute of limitations ruling on her sexual abuse charges against the former president.